Investors warned over risky get-rich-quick property schemes in the UK and the U.S.

Investors are gambling their life savings on get-rich-quick property schemes that buy derelict homes in Detroit and tiny student flats in the UK.

Britons sick of plummeting pensions and rock-bottom savings rates are being targeted at presentations that promise to reveal the secrets of the property market.

They are convinced to sign up, and pump thousands of pounds into properties they’ve never seen, in places they’ll never visit.

Trouble: Investing in run-down homes can be a risky business

Other schemes involve buying homes that can be let out to tenants at once. But while buy-to-let is booming, anyone lured into putting their cash in to these ‘opportunities’ without properly investigating the firms risks losing their entire nest-egg.

The boom in these investments echoes what happened in the buy-to-let bubble a decade ago when would-be landlords hoping to benefit from soaring house prices were promised riches in return for buying unbuilt rental flats abroad or in Britain.

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Often these developments made big losses and, in some cases, were never built. Many investors saw all their cash go up in smoke.

'In Detroit, house prices are down 50 per cent over five years'

Tens of thousands of empty homes are up for auction in U.S. cities hammered by the property downturn, such as Detroit or Atlanta. House prices are also falling in both cities.

Atlanta suffered an 18 per cent drop last year. In Detroit prices are down 50 per cent over five years. But property companies are snapping up these homes for just a few thousand dollars, then flogging them on to British investors at a profit.

The salesmen claim that if you stump up £25,000 to £35,000, you’ll be able to buy a three-bedroom house with a tenant.
In some cases, they claim £500 a month is guaranteed, often because the tenant’s rent is partly covered by the local authority.

But buy-to-let investors are being warned that without the proper checks these schemes can be worthless.
Investors in Detroit have been left with derelict properties that have no tenants.

And after the scheme goes wrong, they have also been forced to pay huge amounts in tax and in fees to maintain the homes.

She paid Assetz a £2,350 arrangement fee to secure the property. She says she was promised a refurbished property and a guarantee it would be tenanted in 90 days.

In October 2010, she paid £28,500 to a U.S. firm, NSUK, which operated the scheme. However, the property had no tenant and was in a poor state of repair.
But since then Mrs Busaidy says she has paid £4,000 in tax and another £4,000 in repairs for the property that she never expected to have to pay.

'Patricia Busaidy, 67, paid £28,500 to a U.S. firm. Local estate agents say houses in the road are now selling for £800.'

Local estate agents told Money Mail homes on her street have sold for as little as £800 in the past six months.

Ms Busaidy, a British citizen who lives in France, says: ‘It has become a stone around our necks, gobbling up both money and time, causing enormous stress.’

Assetz says it lays the blame on NSUK, which failed to renovate the properties, as well as another firm called Nuevo Skye UK Ltd, which promoted the scheme in the UK.

Stuart Law, Assetz’s chief executive, says he has tried to help customers affected by the problems, but says he will not hand back the deposit to Ms Busaidy.

NSUK’s CEO Tom Smith told Money Mail there had been problems with one of the letting companies, but claimed he’d done all he could to solve them. British mortgage broker Mark Demby, who ran Nuevo Skye, could not be reached for comment.

Claire Williams, a British estate agent based in Detroit, says: ‘We hear from British people who have bought these homes as prices are so low. They are sent pictures and hand over their money to the investment firm. They then find there is no home, as it’s beyond repair.’

Property companies are also hoping to find investors for blocks of one-room flats known as ‘student pods’ springing up across the UK.

These luxury flats charge students rents of up to £250 a week.
Investment firms are selling these rooms for between £14,500 and £45,000 — but promising rent of more than £1,000 a month. Investors, who are responsible for finding tenants, must also pay an annual management fee of around £1,000.

But experts warn a glut of these and a crippling rise in university fees could mean there’s less demand, and worry many rooms may not be filled.